Moody’s Investors Service says the agreement ending the three-month-old strike by the Writers Guild of America (WGA) against TV and movie studios does not carry credit implications for rated media companies and also did not harm credit quality.
"We do not expect the settlement to have a noticeable impact on the financial health of the affected media companies. The agreement is noteworthy, however, in that it creates precedent for writers being compensated when their creations are exploited in new digital media such as the Internet," said Moody’s Senior Vice President Neil Begley.
The new contract nearly doubles the rates paid for TV shows and films legally sold and downloaded on the Internet once certain costs are recovered; it also provides for some relatively modest residual fees for the ad-supported streaming of TV shows via the Internet. Moody’s said the WGA settlement provides for better terms than those of the recently struck deal with Directors Guild in that it provides for slightly higher potential residual fees in the third year of the new three-year contract.
"Probably the most important economic success on behalf of the writers is the increase in DVD residuals since DVD revenues are a material portion of studio revenues, especially compared to Internet and new media revenues at this point," said Begley.